How the ACA Could Be Repealed and Replaced

December 2, 2016 | Asad Karamally

Background

As we face the fallout of a contentious election, the conversation is turning toward the legislative agenda in the coming years. With Republicans holding control of the House, Senate, and White House, a number of major proposals could be passed in the next two years. Foremost amongst these is the repeal and replacement of the Affordable Care Act; Republicans have been blocking changes and attempting to repeal the act since it was passed in 2010. They argue that the ACA is such a complex and flawed system that the only way to improve it would be to replace it. Without a 60-seat supermajority in the Senate, Republicans cannot completely eliminate the legislation, however there are methods they may use that would render it practically worthless.

How to Repeal

There are two likely methods that Republicans could use to dismantle Obamacare and push a replacement through.

The first, by far the less likely of the two options, is to institute filibuster reform, thereby overcoming the need for a supermajority. At any time after the start of the next Senate session, Republicans could choose to remove the provisions that allow for the filibuster from the Senate rules with a simple majority vote. This method is likely to face serious opposition from Democrats who will be in the minority. However, they may face skepticism, as then Democratic Senate Majority Leader Harry Reid originally set the precedent for such a rules change in 2013; Reid proposed and passed a ban on the use of the filibuster on executive branch nominees. At the time, top Republicans warned that Democrats would suffer for this circumvention when they lost their Senate majority. If Republicans choose to ban the use of the filibuster during the next session, they will need only a 51-seat majority to repeal the ACA and pass any replacement they choose.

The second method by which the ACA could be dismantled is a process called “budget reconciliation.” Budget reconciliation, which is not subject to filibuster, can be used for legislation related to revenue, spending, or the debt limit. The Congressional Budget Act limits debate on reconciliation bills in the Senate to 20-hours and the process of compromise between the two houses to 10-hours. By reducing the funding to the ACA, the Senate could hamstring the act. For example, a reconciliation bill could sunset funding for subsidies in Obamacare exchanges, eliminating most of the benefits that the exchanges offer. Additionally, budget reconciliation could be used to re-write portions of the ACA, as long as the results save money or are budget neutral; notably this process could be used to block grant the Medicaid program. However, they would not be able to remove provisions unrelated to funding, such as the prohibition against withholding coverage from those with pre-existing conditions or the provision allowing young adults to remain on their parents coverage until age 26.

A partial model for how this method might be put into practice is the budget reconciliation bill that was passed last year and then vetoed by President Obama. The bill, which was supported almost entirely along party lines, eliminated the employer and individual mandates, withdrew federal funding for Planned Parenthood, and ended taxes on medical devices and high-cost insurance plans. This cycle and last cycle, many Republicans capitalized on dissatisfaction with Obamacare and campaigned on promises to repeal it. Without a Democrat in the White House, there is little danger of a veto stopping them from going through with their promises.

Of course, in the case that Republicans can convince moderate Democrats to support a potential replacement for Obamacare and are then able to attain a 60-seat supermajority, they would not need to institute filibuster reform or use budget reconciliation.

Possible Replacements

Several ACA alternatives have been proposed in recent years, with Speaker Ryan’s “A Better Way” foremost amongst them, however a consensus has not yet been reached.

“A Better Way” was originally released by Speaker Ryan in June, the plan was released as white paper rather than legislation, and therefore forgoes determining specific costs of many of its elements. Although it is not concrete legislation, the plan lays out many of the central tenets of a potential Republican replacement for Obamacare.

The plan repeals the ACA but retains some of its more popular elements, such as allowing young adults to stay on their parents insurance, and prohibiting dropping beneficiaries based on their health status. The key to this plan lies in the way that it reconstructs federal subsidies for health care. Under the ACA, consumers can purchase insurance through federally subsidized health insurance exchanges, and those who do not have employer sponsored insurance receive tax credits to help make health plans more affordable. Speaker Ryan’s plan replaces this system by distributing tax credits to all consumers who purchase insurance plans in the marketplace; older consumers would receive larger tax credits to help pay for more expensive coverage. Several dollar amounts have been suggested by independent policy analysts however, “A Better Way” is not in the format of legislation and therefore does not specify how much these tax credits would amount to. Ryan’s plan does specify that any money that consumers choose not to spend from their tax credits may be put into a Health Savings Account that could be used to pay for unexpected medical expenses.

The plan seeks to reduce the cost of health insurance premiums by introducing more competition in the market, the tax credits are intended to cover the cost of premiums at pre-ACA levels. It is unclear how “A Better Way” will handle the many millions of previously uninsured individuals who were able to obtain coverage through ACA subsidies; the plan would limit federal funding for Medicaid and provide states the option for a block grant or a per capita cap. A per capita cap would set a per enrollee dollar limit to federal healthcare funding distributed to states. This type of program has been a staple of past Republican healthcare proposals due to the greater freedom it allows to states in redistributing their funding. Republicans argue that this method would be more efficient in tailoring healthcare dollars to the populations of specific states, rather than the nationwide approach that Democratic plans focus on.

Additionally, insurers would only be required to cover individuals with pre-existing conditions who had continuously maintained coverage. For those who had not maintained coverage and did not purchase it in a one-time open enrollment opportunity, “A Better Way” would reinstitute high-risk pools.

Finally, Ryan’s plan would allow insurance to be purchased across state lines, in another effort to increase competition. Taken as a whole, Ryan’s plan is a major effort to simplify the complex regulations created by Obamacare, however, it is difficult to evaluate without specific dollar amounts and could turn out to be more costly than expected.

President-elect Trump has not put forward a comprehensive plan for healthcare reform, however he has made it clear that he is fully onboard with a repeal of the ACA. Trump’s health policy proposals have prominently featured the expansion of tax-free Health Savings Accounts and suggested a new tax deduction for health insurance premiums. Similar to the traditional GOP stance, Trump’s proposals have also featured block grants for Medicaid and allowing insurance to be sold across state lines. These proposals would be likely to benefit high-income earners who benefit from the tax reductions, however, they would be of almost no assistance to those who need the most help. Some estimates have shown that repealing Obamacare and replacing Trump’s plan would result in the loss of health insurance to over 20 million individuals. Although, repealing Obamacare’s provisions would result in a saving of over $1 trillion, the elimination of tax increases and Medicare savings would result in a net loss of half a trillion dollars. Given the thoroughness of Ryan’s plan, it is likely that the Obamacare replacement is much more similar to “A Better Way” than to Trump’s plan.

Conclusion

At the moment, the most uncertainty lies in the timeline for a replacement of the repeal and replacement of the ACA. In the past, Republicans have simply tried to dismantle the ACA at all costs, however, in more recent times, there is a larger movement towards the phrase “repeal and replace.” Much of this shift can be attributed to the fact that a simple repeal of Obamacare without any effort to replace it with another program would be politically disastrous; millions would lose coverage and Republicans would be blamed for the outcome. The political reality is that Republicans will face intense backlash unless they come up with an adequate replacement, this is problematic as no such replacement is ready to be debated on. Republicans have two options, they could repeal the ACA and replace it at a later date or they could repeal and replace the ACA simultaneously. Either option has its downsides, the first may result in a coverage gap while the second would result in either incomplete legislation being passed, or a significant delay in the process, as the ACA would stay in place until Republicans can come to a consensus on a replacement plan.